New Hope Corporation Ltd (ASX: NHC) shares have suffered a beating so far this year. They are down more than 27% at the time of writing, following a 6% sell-off in the past week alone.
Shares in the coal miner are currently swapping hands at $3.61 per share, down from highs of $4.88 in early February.
Now top broker Macquarie has weighed in on the debate, reiterating its stance on the coal mining giant in a note to clients this week. Let's dive right in and take a look.
Macquarie's outlook for New Hope shares
Macquarie was quick to post its analysis of the coal giant's Q3 FY25 earnings, which were released on Monday. The result saw New Hope shares sink into the red.
Macquarie's note highlighted the decrease in New Hope's production, which dropped 3% compared to the previous period. A declining coal price was partly to blame. Still, sales were slightly higher than expected, at 2 million tonnes, a 1% increase over the year.
However, the company's sales and production targets were slightly below expectations due to rail capacity issues at its New Acland mine, resulting in a 7% miss in coal sales guidance at the site.
Management's guidance for annual coal production was also reduced as a result of these setbacks.
Consequently, Macquarie reduced its target price on New Hope shares to $4, down 7% from the previous target. This implies an upside of about 11% at the time of writing.
The broker did not change its rating of hold on the coal mining stock.
NHC highlighted rail capacity constraints at New Acland with continued major rail system outages expected in June and July. NHC has reduced coal production/sales guidance by 9%/10% at New Acland due to the railing bottleneck.
We note the revised coal sales guidance of 2,250-2,650kt represents a miss of 7% (mid-point) against market consensus, but only 2% at the group level
What's next for New Hope?
Thankfully it wasn't all downside for New Hope shares, likely the reason behind the hold versus a sell rating in my view.
One of the "interesting" points Macquarie noted was the company's buyback program, which is set to continue. It has about $100 million authorised for this over the coming year. This is about 3.3% of its current market cap of $3.1 billion.
In terms of upcoming catalysts, the broker says that improvements to rail capacity at the New Acland are also expected.
Rail capacity increase at New Acland and production ramp up at Malabar present near-term catalysts for NHC…
…. The A$100m on-market buyback continues with the company having a $288m in cash and $372m in fixed income investments.
Macquarie joins the consensus of analyst estimates in rating New Hope shares a hold, according to CommSec.
Foolish Takeaway
New Hope shares are currently under pressure after the coal miner's Q3 numbers, and Macquarie has just weighed in with its views.
Whilst it rates the stock neutral, it does value the company at $4 apiece, which, excluding any prospective dividends, equals about 11% upside at the time of writing.
As to what happens from here, only time will tell. The stock is down 26% in the past year.
